From the VG Bookshelf: Lessons from the Past
From the VG Bookshelf: Lessons from the Past
Today’s Bookshelf is a slight deviation from normal. Instead of reviewing a book, I wanted to highlight an article by Thomas Sowell. “Lessons from the Past” appeared in Jewish World Review earlier this year. As with so much of Professor Sowell’s work, the article takes what so many perceive as truth and sets it on its ear. In this case, he takes on racism, minimum wage and how so-called good intentions often have bad results.
The article starts off with “a black, 17-year-old high school dropout” leaving home in 1948. According to Sowell, this young man hadn’t attended school since the ninth grade. He had no skills, not much experience and needed to mature. Even so, he was able to find a job and support himself “to a far greater extent than someone similar can find jobs today.” Sowell should know because he was that young man and, in the decades since, he’s researched the economic conditions he faced so long ago.
And let’s face it, when Sowell researches economic trends and conditions, he does his homework and understands it much better than most of the rest of us, our elected politicians included.
The first interesting fact Sowell notes is that the unemployment rates for young black men like him back then was “just under” 10%. That rate was no higher than what young white men faced. Now look at the difference between the two demographics today. How do we explain the unemployment rate for young men of color (to use the current phrase du jour) that has, at times, been twice that of their white counterparts in recent years?
As Sowell points out, the default explanation for some is racism. But, if that’s the case, what about the 1948 numbers? Professor Sowell writes, “No sane person who was alive in 1948 could believe that. Racism was worse — and of course there was no Civil Rights Act of 1964 then.”
Hmm, perhaps we are starting to see the answer. Could good intentions and politics be at least part of the explanation?
The short answer is “yes” and Professor Sowell succinctly explains why.
In 1948, there was a minimum wage law in place. In fact, there had been one for a decade or so. But, even though it was on the books, according to Sowell it didn’t matter. Why? The country had suffered through a decade of high inflation that had, as a result, caused wages to rise above the minimum level set by law. Even unskilled, low-level jobs saw this effect. While no one likes inflation, in this particular instance, it proved one of the problems with such laws. You have to keep changing the law to keep up with inflation. While I can see the government doing this, can you see it lowering the minimum wage if inflation lowers? No? Neither can I.
Then there’s bit of wisdom from Professor Sowell, something our social do-gooders and politicians seem to overlook.
Among the effects of a minimum wage law, when it is effective, is that many unskilled and inexperienced workers are priced out of a job, when employers do not find them worth what the law specifies. Another effect of a minimum wage law is that it can lead to a chronic surplus of job applicants.”
Sounds familiar, doesn’t it? This is exactly what we’re seeing in cities around the nation where local or state politicians have arbitrarily raised minimum wage to $15/hour without consideration of what that will do to the fiscal health of the businesses involved. It is what businesses in cities like Dallas are facing with new local laws requiring increased benefits for employees, even those who work part-time.
What happens when you impact a business’ bottom line? Several things. The cost to consumers goes up. Hours worked per employee are cut. Total number of employees are cut. All that leads to not only fewer dollars being spent because people have fewer disposable dollars in their pocket, it can lead to higher unemployment as smaller businesses have to close.
Or, to put it a different way, it is easier for an employer to hire the white or Asian or whatever applicant over the black applicant if he has a large surplus of people vying for the same job. But, if that applicant pool is cut in half, it is much more difficult to let racism rule your business decisions. You need a qualified employee in that position and economics can, as 1948 showed, overcome racism.
When government steps in to artificially inflate wages, the wage gap widens. This is nothing new from Professor Sowell, but it can’t be repeated enough. Good intentions or not, the result of government interference when it comes to personal economics often falls on the negative side of the ledger.
There’s another factor the good professor points out toward the end of the article. Our education system. Decades after leaving home, he too time to examine the math textbook of some of his young relations. These relatives, like himself at their age, lived in Harlem. Can you imagine his reaction to discover these relatives were being taught a lower level math in 11th grade than he’d been taught in 9th.
As he put it, “The opportunities open to my young relatives in Harlem — and to other young blacks elsewhere — were not nearly as good as the opportunities open to me back in 1948.”
And why? Because many of the progressive policies advanced by our politicians and others have had the opposite effect than what was promised.
If you take nothing else away from Professor Sowell’s article, please take this final quote to heart:
One of the tragedies of our times is that so many people judge by rhetoric, rather than by results.”